Propane users latest to feel power crunch

ALPAUGH -- The centerpiece of Harry Parson's patch of dirt and
weeds -- there among the old cars, a tractor, a bus and a menagerie
of pets -- is a shiny white propane tank.

Tethered to houses in the agricultural San Joaquin Valley like
grazing animals, the tanks are sources of both heat and
frustration, as even rural residents get hit by the energy
crisis.

Propane prices have jumped nationwide, but have hit hardest in
California, doubling to more than $2 a gallon, as a byproduct of
soaring natural gas costs that have put the state on the brink of
blackouts for more than a month.

Though lower holiday weekend demand gave Californians their
first reprieve from 32 consecutive days of Stage 3 alerts Friday
night, the California Independent System Operator in Folsom, which
controls the state power grid, has not yet released a forecast for
the coming week.

In Sacramento on Monday, negotiations began between utility
representatives, lawmakers and Gov. Gray Davis over the governor's
plan to rescue the state from its power crisis. Negotiations are
expected to continue all week.

Propane was always considered clean, efficient and cheap -- the
fuel of choice for rural residents, who use it to heat their homes,
warm their water, cook and run appliances.

Now everyone living beyond the reach of natural gas lines can
relate to urban counterparts who have directly absorbed higher
natural gas prices.

Parson, a retired electrician, said he's stretching his dollars.
At 68, he's paying for heart medication and trying to upgrade to a
doublewide trailer, along with feeding his menagerie of ducks,
rabbits, sheep, dogs, cats and "3-foot long" fish that lurk
somewhere in his homemade pond.

Add his cost of propane -- which recently peaked at about $2.35
a gallon compared to about $1.20 last year -- and his living hasn't
been so easy. He keeps his power off during the day, except to run
his refrigerator, and only fires up the heat for a few hours at
night before crawling under a pile of blankets.

"The price of this propane has gotten ridiculous," Parson
said.

The higher propane costs result from a complex power production
structure that was hit with something akin to a quintuple whammy,
said Mary Reynolds, executive vice president of the Western Propane
Gas Association.

Last summer's higher oil prices initially raised prices for
propane, a byproduct of crude oil refineries and natural-gas
processing plants. Then, as wholesale natural-gas costs escalated,
petroleum companies switched to propane to power their refineries
instead of the more expensive natural gas, limiting the propane
available to homes and businesses.

In addition, three previous winters had left propane suppliers
short on cash and with less propane in storage. When record cold
hit in November and December, demand spiked and propane had to be
imported by rail from Canada and Rocky Mountain states, driving up
transportation costs.

Considering all those pressures, Reynolds said it's remarkable
that the propane price only doubled. Much of that is due to dealers
-- often mom and pop operations -- absorbing some of the costs to
remain competitive.